new sebi insider trading regulations 2015

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NEW INSIDER TRADING REGULATIONS, 2015 -An INTROSPECTION

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NEW INSIDER TRADING

REGULATIONS, 2015

-An

INTROSPECTION

OVERVIEW

With the objective of bringing the basic framework governing the

regime of Insider Trading practices in line with the dynamic

global scenario and to tighten the gaps of existing norms, SEBI

has notified the New PIT Regulations to be renowned as SEBI

(Prohibition of Insider Trading) Regulations, 2015, on 15th

January, 2015. These Regulations will be effective w.e.f 15th

May, 2015.

What is Insider Trading?

Insider Trading is trading/ dealing of a company’s stock by an

insider/ connected person on the basis of Unpublished Price

Sensitive Information.

Who is an Insider?

INSIDER

CONNECTED

PERSON

PERSON IN

POSSESSION OF

UPSI

The Regulations also intend to bring in its ambit persons who

may seemingly not occupy any position in a company but are in

regular touch with the company & its officers & have access to

its internal nitty gritties.

OR

Connected Person With Detailed Clarification…

Following shall be Connected/ Deemed to be connected with the Company:

any person who is or has been associated with company, in any manner, during the six

months prior to the concerned act;

an immediate relative of the connected person;

a holding / associate/ subsidiary company;

an official of stock exchange or of clearing corporation;

a banker of the company;

A concern, firm, trust, HUF, company or AOP wherein a director of a company/

immediate relative/ banker of company, has more that 10% of the holding or interest;

What includes Trading?

Trading means and includes:

Subscribing;

Buying;

Selling;

Dealing;

Agreeing to buy, sell, subscribe, deal in any securities;

UNPUBLISHED PRICE SENSITIVE

INFORMATION

Any information, relating to a company or its securities, that is

not generally available, and is likely to materially affect the

price of the securities is a UPSI.

It includes:-

Financial results;

Dividends;

Change in capital structure;

Mergers, de-mergers, acquisitions, delisting and such other transactions;

Changes in KMPs;

Material events in accordance with listing agreement;

Who will Monitor?

The Regulations have casted major responsibility for monitoring & implementing

the codes specified in these Regulations upon the Compliance Officer;

Compliance Officer means any senior officer, designated so and reporting to the

BOD, who is financially literate and well-versed with legal & regulatory

compliances;

He shall be responsible for compliance of policies, procedures, maintenance of

records, monitoring adherence to the rules for the preservation of unpublished price

sensitive information, monitoring of trades and the implementation of the codes

specified in these regulations under the overall supervision of the board of directors

of the listed company;

THE RULE & exceptions thereto…

No insider shall communicate, provide or allow access to any UPSI, to

any person including other insiders, however, there are certain

exceptions to this:

Except for performance of duties, for legitimate business purposes

& on a need to know basis. :

UPSI may be communicated in connection with an open offer under the takeover

regulations, where the BOD is of the view that the proposed transaction is in the best

interest of the company;

If the proposed transaction does not entail an open offer, then the BODs shall

disseminate the UPSI atleast 2 trading days prior to the proposed transaction;

Defences available to an Insider

THE ONUS OF PROVING THE INNOCENCE LIES ON THE INSIDER

Contract confidentiality & Non-disclosure agreements has been executed;

The transaction is an off-market inter-se transfer between promoters;

In case of non-individual insiders:

Individuals who were in possession of such UPSI were different from the

individuals taking decisions;

Appropriate & adequate arrangements were in place to ensure that Regulations

are not violated;

Trades were pursuant to a trading plan;

TRADING PLAN

These Regulations entail a new concept of trading plans which was not there under

the erstwhile Regulations on insider trading:

Insider shall have an option to formulate a Trading Plan & present it to compliance

officer for approval & public disclosure. Upon approval, the Compliance Officer

shall notify the TP to the Stock Exchanges.

Trading plan shall be for a period of 12 months.

Such TP shall not entail commencement of trading earlier than 6 months from public

disclosure of plan.

Trading shall not commence for the period between 20th trading day prior to last day of

any financial period for which results are required to be announced by the issuer of the

securities & 2nd trading day after the disclosure of such financial results.

TP shall set out value of trades to be effected or number of securities to be traded along

with the nature of trade; and also the intervals/ dates on trade execution;

Trading by designated persons shall be subject to pre-clearance by compliance officer.

Overlapping TPs are not allowed.

A TP once approved, shall be irrevocable and cannot be withdrawn.

Continued…

Codes Of Conduct

CODE OF FAIR

DISCLOSURECODE OF CONDUCT

Formulated by: Board of directors of

every listed company

Policies shall be framed in

accordance with Schedule A &

publish on its website

Formulated by: Board of directors of every listed

companies, market intermediaries & all other persons

(including professional firms, auditors, consultants

etc.) who are essentially in possession of UPSI

Policies shall be framed in accordance with

Schedule B

Code of Fair Disclosure, Schedule A

…...a new concept

Some important contents of this Code are:

Uniform & universal dissemination of UPSI to avoid selective disclosure;

Designation of a senior officer as a chief investor relations officer to deal

with dissemination of information & disclosure of UPSI;

Appropriate & fair response to queries on new reports & requests for

verification of market roumers by regulatory authority;

Ensuring that information shared with analysts & research personnel is not

UPSI; And more…..

Code of Conduct, Schedule B (Common for Companies

& Intermediaries)

All information shall be handled within the organization on a need-to-know basis;

The BOD shall, in consultation with the Compliance Officer, specify the designated persons to be covered by

such code;

A notional trading window shall be used as an instrument of monitoring trading by designated persons. Trading

window shall be closed designated persons is expected to be in possession of UPSI;

Compliance officer shall determine timing for re-opening of the trading window, which shall not be than 48 hrs

when the information becomes publically available;

Designated persons shall be subject to pre-clearance by compliance officer;

Code of conduct shall stipulate such formats as the BOD deems fit for making applications for pre-clearance etc.;

And more…..

DISCLOSURES

INITIAL DISCLOSURE

CONTINUAL DISCLOSURE

DISCLOSURE BY

CONNECTED PERSONS

TYPE OF

DISCLOSURE

WHAT BY TO DURATION

INITIAL

DISCLOSURES

Holding in the

Company

Promoter, KMP or

Director of a

listed company

Company Within 30 days of

these Regulation

taking effect

Holding on the date

of appointment

Promoter, KMP or

Director

Company Within 7 days of

such appointment

CONTINUAL

DISCLOSURES

Value of securities

traded, in aggregate,

in a calendar quarter,

exceeds traded value

of Rs. 10 Lac or any

other value as may be

prescribed

Promoter or

Director or

Employee

Company Within two days of

such transaction

Company Stock

Exchange

Within two days of

receipt of

disclosure

TYPE OF

DISCLOSURE

WHAT BY TO DURATION

DISCLOSURE

BY OTHER

CONNECTED

PERSON

As required by the

company

Connected

Person

Company As specified by

the Company

PENALTIES

Any contravention of these Regulations shall be dealt with by

SEBI in accordance with the SEBI Act, 1992.

MONETARY PENALTY: Section 15G of the Act imposes penalty of atleast

Rs10 Lacs, which may extend to Rs. 25 Crore or three times of profits made

out of insider trading, whichever is higher.

IMPRISONMENT: Section 24 of SEBI Act even goes to the extent of

imprisonment upto 10 years or fine upto Rs. 25 Crore, or both, for any

offences pertaining to contravention of the provisions of the Act.

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